Parametric, blockchain pushed at FEMA

Thanks for previously subscribing to the Risk Market News newsletter. We have restarted publishing and switched email platforms. We are also changing to a paid subscription model in 2020, but as a thank your for your earlier interest we will continue sending you the subscriber-only newsletter through January 1.

FEMA urged to explore blockchain, parametric solutions

A draft report authored by the Federal Emergency Management Agency’s (FEMA) National Advisory Council suggests the government develop parametric insurance policies and use blockchain mechanisms to speed up lengthy post-disaster claims process.

• Parametric Cover

The report, drafted on November, recommends that FEMA gather industry experts from insurance, technology and risk management fields to explore “viable solutions” for expanding parametric programs.

Parametric insurance pays out immediately when a certain threshold, such as water depth or wind speed, is reached; thus, expediting funding and reducing overall administrative costs.

The goal, according to the recommendation, is to move more insureds into the private sector.

[Having] the ability for communities to purchase an overarching parametric policy to cover their citizens would again shift the burden of post-disaster assistance for the various types of disasters to the community and insurance industry instead of putting the onus mostly on federal and SLTT governments.

• Blockchain Payouts

The report also calls for FEMA to test insurance claims and payouts on the blockchain.

The Administrator should create a pilot blockchain-based land/property registry with critical information needed to file an insurance or disaster assistance claim. The Administrator should also partner with the insurance industry to consider making the triggering event a federal disaster declaration or the buildup to an impending threat or hazard.

By piloting a blockchain-based registry in this manner, FEMA can catalyze cross-sector engagement and develop technology-enabled use cases that can improve the speed of disaster responses and insurance claim payments, without sacrificing accuracy or increasing the risk of fraud. Furthermore, these types of activities, a veritable Disaster Mitigation Lab, can further enable other technology-powered solutions, such as geo-referencing properties or vulnerable communities, among others.

Verisk bets on acquisitions and new products to boost margins

Verisk Analytics CFO Lee Shavel argued that the company’s several year push for acquisitions and new product development has tamped down profit margins but the data and modeling firm was positioned for revenue growth.

Speaking at an investor conference today, Shavel was asked about Verisk’s operating model and the promise to grow value 7% to 8%  despite margins decreasing by 400 basis points over the past four to five years.

Shavel argued that decline was the result of  an overall “portfolio effect” as Verisk invested a new businesses and new products. He explained that although Verisk’s insurance vertical has EBITA margins of between 50% and 60%, they have acquired businesses that rarely have margins at that level.

“Our focus is on for each of our businesses is that there is operating leverage that expresses itself in terms of expanding margins. So for each of those businesses, insurance, energy, financial services, our expectation is that we will see all of those margins grow

He added that the company’s new product development is also impacting profit.

“We also are pursuing a number of investment opportunities throughout the business. Some have significant scale and those naturally necessitate investing in a business at lower or negative margins at the the outset.

Today’s Risk Reads

Could life insurance go up in smoke for some vapers? (Reuters)

Global reinsurers are stepping up their warnings to life insurer clients about the potential risks of vaping, putting pressure on underwriters to charge certain vapers higher rates than smokers, or even exclude them altogether.

Insurers cherry-pick homes, leave flooded ones for feds (EE News)

An E&E News review of state and federal records shows that insurance companies have escaped paying large claims after major hurricanes, like Michael, and are likely targeting homes that are profitable to insure. It comes as insurers are beginning to offer flood coverage for the first time in decades.

Camp Fire failure part of PG&E’s ‘pattern’ of poor maintenance, regulators say (SF Chronicle)

Pacific Gas and Electric Co. failed to properly inspect and maintain the high-voltage power line that started the Camp Fire amid systemic problems at the utility that caused it to miss a chance to avert the historic disaster, state regulatory officials have determined.